Microsoft has invested $300 million in a new subsidiary floated by Barnes & Noble, which will include its Nook business and its educational College business. Microsoft’s cash infusion will get it a 17.6% equity stake, valuing the subsidiary at $1.7 billion. With this move, Microsoft is jumping into the e-books business, in which it will compete with the likes of Amazon, Apple and Google.

Barnes & Noble is the second largest player in the e-book space, but much smaller than Amazon, which completely dominates the market. Apple has been trying to get a foothold in the space and recently found itself in the middle of an antitrust investigation by the DoJ against major book publishers.

Microsoft will be paying B&N another $180 million as part of a revenue sharing agreement for the Nook app that B&N will make for the Windows 8 platform. It will also pay it another $125 million to assist the new subsidiary in acquiring local digital reading content and developing new technology. The total payout to B&N adds up to $605 million over a period of 5 years.

The enemy of my enemy is my friend

With this new investment, Microsoft has given B&N a much needed cash infusion to compete with Amazon and Apple and also secured e-book content for Windows 8, which will enable Windows 8 tablets to compete with Amazon’s Kindle Fire and Apple’s iPad better.

Thanks to this deal, Microsoft may also have an in in the educational content market, which Apple has been aggressively courting in the last couple of years with the iPad. Microsoft could also be looking at launching a Windows 8 powered ebook reader with content by B&N.

This may be one of the best strategic moves by Microsoft, which will further improve Windows 8′s chances in the tablet market.

First Edition Design Publishinghttp:www.firsteditiondesignpublishing.com, based in Sarasota, Florida, USA leads the industry in eBook distribution. They convert, format and submit eBooks to Amazon, Apple, Barnes and Noble, Sony, Google, Kobo, Diesel, 3M, Ingram, Baker and Taylor, Nielsen, EBSCO, scores of additional on-line retailers and libraries, schools, colleges and universities. The company also has a POD (Print On Demand) division, which creates printed books and makes them available worldwide through their distribution network.